Partition actions: 9 tips from a lawyer

Learn the essentials of partition actions first-hand: when an action succeeds, whether a judicial auction is inevitable and what it costs. Experienced property lawyer Mag. Patrick Maydell, LL.M. offers these practical tips and explanations.

1) Why do partition actions arise?

Partition actions arise when co-owners can no longer agree on the future of jointly owned property. A sole owner can generally do what they wish with their property, including selling it without anyone else's consent. A co-owner's freedom, however, is limited by the other owners' rights.

This form of ownership is often called “ordinary co-ownership” to distinguish it from condominium ownership. Each co-owner holds an undivided share in the whole property, for example one half or one third.

A common misconception is that a co-owner may sell their share only with the others' consent. Consent is not required to sell one's own share, but in practice such shares are often difficult to sell.

Selling the entire property is therefore often more promising. If the co-owners cannot agree, a partition action remains available, for example where one owner wants to sell and another does not.

2) How does a partition action work?

One or more co-owners bring the action in court. If the claimant seeks a judicial auction of the property, this is an action for partition by sale (Zivilteilung). If the aim is to divide it into independent units, this is physical partition (Realteilung).

By law, physical partition takes priority. The property must be divided into independent units if this is possible. A judicial auction is available only where physical partition is not an option.

The judge determines the appropriate form of partition on the basis of expert evidence. Where physical partition is possible, the court decides who receives each part, potentially subject to an equalisation payment.

If physical partition is impossible, the property must be auctioned. The defendant, the co-owner opposing partition, may argue that partition would be at an “inopportune time” or “to the detriment of the others”. Such obstacles to partition must be temporary, for example where impending changes to zoning would make immediate partition disadvantageous. Following a successful auction, the proceeds are distributed according to the ownership shares.

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3) Does a partition action always lead to an auction?

No. The parties are always free to settle. With houses, it may also be possible to establish condominium ownership if the building can be divided into independent residential units. Apartments, by contrast, cannot normally be divided into separate residential units, so an auction is generally to be expected.

4) Can an auction be prevented? What is the minimum price?

Partition may be postponed because of an inopportune time or detriment to the others, for example if partition would be disproportionate in view of an urgent housing need. There is no auction where physical partition or the establishment of condominium ownership is possible. Otherwise, the house must be auctioned.

Naturally, the aim is a good sale price. Contrary to popular belief, a judicial auction following a partition action does not normally involve a sale below market value, unlike an ordinary enforcement auction initiated by a bank for unpaid loans. Section 352a(3) of the Austrian Enforcement Code (EO) provides that the minimum bid is the appraised value, meaning the property's market value.

In practice, a judicial auction therefore normally has no disadvantage compared with a private sale, apart from taking longer. It may even achieve a substantially higher price, as the following example shows.

For a detailed account of the process, see Auctions of jointly owned property: the essentials.

In one of my cases, I arranged the auction, following a partition action, of a detached house on a 608 m² plot in Vienna's 14th district. It was appraised at EUR 440,000. There was considerable interest at the viewing, so we agreed with the other side to raise the minimum price to EUR 500,000.

The auction greatly exceeded that amount: the house sold for exactly one million euros. Afterwards, everyone agreed that such a price would not have been achieved in a private sale. The psychological pressure of competitive bidding at a public court auction, for example with 100 participants, should not be underestimated. It can lead the highest bidder to pay a price they would not have paid privately.

“Contrary to popular belief, a judicial auction can achieve a substantially higher price than a sale outside court.” — Mag. Patrick Maydell, LL.M., Attorney at Law

5) When can a house actually be divided?

There are three decisive requirements for physical partition: division into comparable parts, division in proportion to the ownership shares, and division without loss of value. A garden plot and a building plot with a villa, for example, are not comparable parts. Proportionate division requires as many physical parts as there are co-owners. Their relative values must approximately reflect the ownership shares; minor differences can be equalised in money.

The house must also be divisible without a substantial loss of value. Such loss exists where the whole house is objectively worth significantly more than the resulting parts, or the division would itself cause high costs and consequential expenses. Courts have regarded a 5.28% reduction as insignificant, but, for example, a 15% reduction as disproportionate.

If sufficient units suitable for condominium ownership exist or can be created without disproportionate expense, condominium ownership may also be established. In all other cases, partition by sale through a judicial auction remains available.

6) Can an apartment that we jointly own be divided?

Partition means dissolving the ownership community. Physical division into two comparable units is only feasible if the apartment can actually be split into two such residential units. Apartments are therefore generally auctioned and the proceeds distributed.

7) What are the advantages of establishing condominium ownership?

It creates independent residential units that can readily be sold. Ordinary co-ownership shares may be legally transferable, but in practice are often almost unsaleable.

For the unit-value assessment (Parifizierung), a chartered technical expert prepares a report on the relative utility value of each unit. This reflects its usable floor area and all factors that increase or reduce its value, expressed as additions to or deductions from the floor area, such as orientation within the building or floor level.

The costs include the expert report, the condominium agreement and the application for land register entry.

8) What does a partition action cost?

The successful party is entitled to reimbursement of litigation costs by the opponent. The property is generally valued using its statutory property value (Grundstückswert). A lower valuation of the claim is possible, but if the opponent challenges it, the court may increase the amount in dispute to that property value.

An example from my practice: Former partners each owned half of a detached house in Vienna. Following separation, the man sought an auction and brought a partition action against the woman.

The claim was valued at EUR 17,000, which generally formed the basis for all procedural costs. Several written submissions were necessary and there were three hearings over five months. The woman initially sought to prevent a sale, arguing that the house could be physically divided into two comparable residential units. Alternatively, she requested condominium ownership.

Extensive settlement discussions at each hearing initially failed. An expert was then appointed to assess whether the house could be divided into two comparable residential units.

The former partners eventually settled: instead of a court auction, they agreed to sell through an estate agent, each bearing their own litigation costs. The house was subsequently sold at a profit.

The defendant's total costs were EUR 5,793.46 including VAT. The claimant additionally had to pay court fees of EUR 707. Costs in other cases may be lower or higher depending on the assessment basis and work involved. I will gladly estimate the expected costs in your situation. If you win, you are entitled to recover costs from the opponent.

9) Must an expert be appointed?

For partition of a house, the judge will normally appoint an expert, as it is often impossible without expert evidence to decide whether the case-law criteria are met: comparable parts, proportionate division and no substantial loss of value. The expert also determines the appraised value used as the minimum auction bid.

The unsuccessful party ultimately bears the expert's costs.

Free initial assessment — call now

If you have questions or need legal assistance with the partition of a house, land or an apartment, call for a free initial assessment or email office@maydell-law.at.

Mag. Patrick Maydell, LL.M.
Attorney at Law
Neustiftgasse 17/1/9
1070 Vienna
Telephone: +43 1 295 4251
office@maydell-law.at